| Filed by Wachovia Corporation pursuant to Rule 425 under the Securities Act of 1933, as amended, and deemed filed pursuant to Rule 14a-12 under the Securities Exchange Act of 1934, as amended
Subject Company: Golden West Financial Corporation
Commission File No.: 1-4629
Date: May 12, 2006 |
This filing may contain certain forward-looking statements with respect to each of Wachovia Corporation (“Wachovia”) and Golden West Financial Corporation (“Golden West”) and the combined company following the proposed merger between Wachovia and Golden West (the “Merger”), as well as the goals, plans, objectives, intentions, expectations, financial condition, results of operations, future performance and business of Wachovia, including, without limitation, (i) statements relating to the benefits of the Merger, including future financial and operating results, cost savings, enhanced revenues and the accretion/dilution to reported earnings that may be realized from the Merger, (ii) statements relating to the benefits of the merger between Wachovia and Westcorp and Wachovia’s related acquisition of WFS Financial Inc (“WFS Financial”), a subsidiary of Westcorp, completed on March 1, 2006 (the “Westcorp Transaction”), including future financial and operating results, cost savings, enhanced revenues and the accretion/dilution to reported earnings that may be realized from the Westcorp Transaction, (iii) statements regarding certain of Wachovia’s and/or Golden West’s goals and expectations with respect to earnings, earnings per share, revenue, expenses and the growth rate in such items, as well as other measures of economic performance, including statements relating to estimates of credit quality trends, and (iv) statements preceded by, followed by or that include the words “may”, “could”, “should”, “would”, “believe”, “anticipate”, “estimate”, “expect”, “intend”, “plan”, “projects”, “outlook” or similar expressions. These statements are based upon the current beliefs and expectations of Wachovia’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. These forward-looking statements involve certain risks and uncertainties that are subject to change based on various factors (many of which are beyond Wachovia’s control).
The following factors, among others, could cause Wachovia’s financial performance to differ materially from that expressed in such forward-looking statements: (1) the risk that the businesses of Wachovia and/or Golden West in connection with the Merger or the businesses of Wachovia, Westcorp and WFS Financial in connection with the Westcorp Transaction will not be integrated successfully or such integration may be
more difficult, time-consuming or costly than expected; (2) expected revenue synergies and cost savings from the Merger or the Westcorp Transaction may not be fully realized or realized within the expected time frame; (3) revenues following the Merger or the Westcorp Transaction may be lower than expected; (4) deposit attrition, operating costs, customer loss and business disruption following the Merger or the Westcorp Transaction, including, without limitation, difficulties in maintaining relationships with employees, may be greater than expected; (5) the ability to obtain governmental approvals of the Merger on the proposed terms and schedule; (6) the failure of Wachovia’s and/or Golden West’s shareholders to approve the Merger, respectively; (7) the strength of the United States economy in general and the strength of the local economies in which Wachovia and/or Golden West conducts operations may be different than expected resulting in, among other things, a deterioration in credit quality or a reduced demand for credit, including the resultant effect on Wachovia’s and/or Golden West’s loan portfolio and allowance for loan losses; (8) the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; (9) potential or actual litigation; (10) inflation, interest rate, market and monetary fluctuations; and (11) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) and the impact of such conditions on Wachovia’s capital markets and capital management activities, including, without limitation, Wachovia’s mergers and acquisition advisory business, equity and debt underwriting activities, private equity investment activities, derivative securities activities, investment and wealth management advisory businesses, and brokerage activities. Additional factors that could cause Wachovia’s and Golden West’s results to differ materially from those described in the forward-looking statements can be found in Wachovia’s and Golden West’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed with the SEC. All subsequent written and oral forward-looking statements concerning Wachovia or the proposed Merger or other matters and attributable to Wachovia or Golden West or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements above. Wachovia and Golden West do not undertake any obligation to update any forward-looking statement, whether written or oral, relating to the matters discussed in this filing.
The proposed Merger will be submitted to Wachovia’s and Golden West’s shareholders for their consideration. Wachovia will file a registration statement, which will include a joint proxy statement/prospectus, and Golden West will file a proxy statement, and each of Wachovia and Golden West may file other relevant documents concerning the proposed Merger with the SEC. Shareholders are urged to read the registration statement and the joint proxy statement/prospectus regarding the proposed Merger when they become available and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they will contain important information. You will be able to obtain a free copy of the joint proxy statement/prospectus, as well as other filings containing information about Wachovia and Golden West, at the SEC’s website (http://www.sec.gov). You will also be able to obtain these documents, free of charge, at Wachovia’s website (http://www.wachovia.com) under the tab “Inside Wachovia – Investor Relations” and then under the heading “Financial Reports - SEC Filings”. Copies of the joint proxy statement/prospectus and the SEC
filings that will be incorporated by reference in the proxy statement/prospectus can also be obtained, free of charge, by directing a request to Wachovia Corporation, Investor Relations, One Wachovia Center, 301 South College Street, Charlotte, NC 28288-0206, (704)-374-6782; or to Golden West, Attn: Investor Relations Department, 1901 Harrison Street, Oakland, CA 94612, (510) 445-3420.
Wachovia and Golden West and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of Wachovia and/or Golden West in connection with the proposed Merger. Information about the directors and executive officers of Wachovia is set forth in the proxy statement for Wachovia’s 2006 annual meeting of shareholders, as filed with the SEC on a Schedule 14A on March 13, 2006. Information about the directors and executive officers of Golden West is set forth in the proxy statement for Golden West’s 2006 annual meeting of shareholders, as filed with the SEC on a Schedule 14A on March 10, 2006. Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction may be obtained by reading the proxy statement/prospectus regarding the proposed Merger when it becomes available. You may obtain free copies of these documents as described in the preceding paragraph.
THE FOLLOWING ARE MATERIALS USED IN A PRESENTATION HELD ON MAY 12, 2006 FOR ANALYSTS AND INVESTORS REGARDING WACHOVIA’S PROPOSED MERGER WITH GOLDEN WEST
Wachovia Corporation
May 12, 2006
Tom Wurtz
Chief Financial Officer
Excess capital created through WB diversification effectively funds premium
Capital required to support Golden West operations is reduced through diversification provided by Wachovia’s business mix and balance sheet Excess capital approximates premium paid to Golden West shareholders
– Reduces effective price paid to market price, P/E paid to Wachovia’s P/E
– Limits cash EPS dilution
Excess capital and market premium*
Estimated GDW excess capital released by WB $3.7-4.1B
Market premium paid (15%) $3.3-3.7B
Limited cash EPS dilution
Golden West 2007 P/E** 11.56x
Wachovia 2007 P/E** 11.40x
Wachovia 2007 cash EPS dilution*** (0.4%)
* Ranges depend on closing date, dilution treatment of GDW stock options ** Based on May 5, 2006 prices and First Call consensus estimates (GDW: $70.51, $6.10 EPS; WB: $59.39, $5.21 EPS)
***See pp. 14-15 of May 8, 2006 presentation for calculations of illustrative cash EPS dilution and accretion
Page 1 – 4622, May 12th Investor Conference Call
Wachovia Mortgage distribution channels
Channel
Products
Customers
Wholesale/ Correspondent*
Retail
Retail Mortgage Originators Internet Mortgage/ Direct Mail
Retail Bank Branches
Fixed/ARMs Home Equity Loans Home Equity Lines of Credit
National Mortgage Brokers Correspondents
Predominantly in-footprint Retail customers Financial Planners Realtors, Builders WB Referred Customers
In-footprint Retail customers
Production Total
2004 $5.3 billion $16.3 billion $23.8 billion $45.4 billion
2005* $4.5 billion $18.5 billion $35.2 billion $58.2 billion
1Q06* $4.4 billion $ 3.9 billion $ 9.6 billion $17.9 billion
*Includes AmNet production; acquisition closed December 2005.
Page 2 – 4622, May 12th Investor Conference Call
Golden West mortgage distribution channels
Channel
Products
Customers
Retail
Wholesale Direct Mail Internet Retail Mortgage Retail Bank Branch
Originators
“Loan Experts” Brand
Option ARM Option ARM Option ARM Option ARM for GDW Option ARM
Full product set
brokered to third party
lenders
Brokers Previous and Previous and Retail Customers, Banking customers
existing retail existing retail Financial Planners,
customers from customers from Builders, Realtors
all channels all channels
Actual Production 1Q Annualized Production
Total Production 2004 $49.0 billion $37.6 billion
2005 51.5 billion 44.7 billion
1Q06 11.6 billion 46.3 billion
1Q Annualized Balance Growth
1Q Balances 2004 $18.6 billion
2005 20.5 billion
1Q06 12.0 billion
Page 3 – 4622, May 12th Investor Conference Call
Golden West retail branch channel
Attractive demographics
Little customer overlap with mortgage channel
– 5% of 750,000 retail branch customers hold a Golden West mortgage
GDW customer base vs. WB core customer base
– GDW retail branches generally serves older population
– GDW low cross-sell focus
– Demographic similarities to WB’s Florida customer base
– Household attrition < 10%/year similar to WB
Demographics of GDW footprint similar to WB footprint
– Urban/suburban orientation
– Faster-growing areas
–$91K average HH income
($82K WB, $61K U.S.)**
Combined Geographic Footprint
Deposit-Wtd Population Growth* Deposit-Wtd Avg HH Income** MSA Population % U.S. Pop.***
Wachovia 8.77% $82,000 42%
Golden West 8.91% 91,000 36%
Wachovia Pro Forma 8.79% 84,000 55%
SunTrust 8.63% 75,000 17%
Wells Fargo 7.77% 80,000 36%
BB&T 7.00% 70,000 18%
Bank of America 6.83% 80,000 66%
AmSouth 6.46% 60,000 8%
Regions 5.85% 59,000 25%
JPMorgan Chase 5.74% 94,000 54%
Citigroup 5.18% 104,000 34%
Huntington 5.07% 68,000 7%
Marshall & Ilsley 5.04% 81,000 12%
Fifth Third 4.51% 73,000 18%
U.S. Bancorp 4.44% 66,000 39%
Comerica 4.27% 83,000 21%
Capital One/North Fork 3.28% 92,500 15%
KeyCorp 2.73% 65,000 20%
M&T 2.26% 72,000 15%
PNC 1.64% 83,000 14%
National City 1.45% 74,000 14%
U.S. Average 6.26% $61,000 83%
* Source: SNL; 5-year average population growth, county-weighted by deposits ** Source: SNL; zip-code weighted by deposits *** Source: SNL
Page 4 – 4622, May 12th Investor Conference Call
Golden West retail branch channel
High quality locations
Retail branches are street level and predominantly “A” sites with respect to quality and location*
– A / A- Sites 80-85%
– B+ Sites 15-20%
– High visibility sites in high income** zip codes
– Very well maintained
Technology infrastructure ATM network Drive-throughs 55 branch consolidations
No deficiencies Add 200 @$40K*** Add 55-60 @$200K***
– Estimated to be an even split between WB and GDW branches
*Based on 95 branch visits by Wachovia during due diligence in California, Texas and Florida. **Source: SNL Financial. ***Cash investment: largely capital which is depreciated.
Page 5 – 4622, May 12th Investor Conference Call
Pre-tax earnings opportunity
Strong sales cultures drive revenue opportunities
2009 expected pre-tax earnings lift = $230 million $160 million
World Savings Mortgage $60 million
Wachovia Mortgage $100 million
Expand product set to include fixed rate
–$17 billion incremental production at 30-40 bps spread
Channel focus
– Retail channel offers “marketable” products through Wachovia Mortgage
– Wholesale channel gains full product offering which should increase broker customer base
Increase sales of option ARMs
–$7 billion in incremental production at 225-250 bps spread
Company focus
– WMC distributes option ARMs in higher-cost metro areas
– Wholesale channel gains full offering which will increase broker customer base $70 million
World Savings Bank Branches
Offer checking products to current customers and through customer acquisition
–$3.1 billion deposits
Does not include:
– Other deposit product sales
– Incremental consumer loans
– Business banking, commercial lending
– Investment sales
– Wealth opportunities
Page 6 – 4622, May 12th Investor Conference Call
Mortgage portfolio statistics
Balance Average Loan Size At Origination
LTV < 70 $54 billion
$121 billion < $250K LTV 70-80 $61 billion
LTV 80+ $6 billion*
Average Portfolio LTV = 68%
Deferred interest is created when borrowers elect minimum payment option for any monthly payment
– Deferred interest is added to legal balance of principal owed by borrower
Deferred interest has grown from $90 million in 1Q05 to $666 million in 1Q06
– Likely to grow by $2-3 billion over next 24 months
– Would raise average LTV from 68% to 71%
Loans underwritten with an expectation of negative amortization
– Loans capped at 125% of original loan amount for loans with original LTV£ 85% and 110% for loans with original LTV > 85%
*Loans originated at LTV’s above 80% covered by mortgage insurance.
Page 7 – 4622, May 12th Investor Conference Call
Spread information
Indices used by Golden West
Definition % of Portfolio
COSI Equal to GDW’s cost of savings 54%
CODI Based on average three-month certificates of deposit yield as published by Federal Reserve in H-15 report (12 mo. moving average) 37%
COFI Equal to average cost of funds of savings institutions in 11th FHLB District 8%
All indices reprice upward after market rates stabilize.
Indexes should rise by 75-125 bps after Fed stops raising rates
– Also would benefit from indexed loans exceeding deposit balances
Risks to repricing benefits include higher prepayments, lower margins on new loans, shift from higher yielding CODI ARMs to lower yielding COSI ARMs
Page 8 – 4622, May 12th Investor Conference Call
Appendix
Page 9 – 4622, May 12th Investor Conference Call
Branch infrastructure costs
($ in millions)
Capital Cost Ongoing Cost Revenue Net Operating Cost
200 ATMs $8-10 $5 $4 $1
55-60 Enhanced $12-15 $1 none assumed $1
Drive-throughs
Physical Structure $25-35 $5 none assumed $5
Signage
Security
Sales Platform
Furniture/Flooring
Office Partitions
$45-60 $11 $7 million
Assumed in Investor Deck $ 20
Excess expenses assumed $13 million
Page 10 – 4622, May 12th Investor Conference Call
Cautionary statement
This investor presentation contains certain forward-looking statements, including, without limitation, (i) statements relating to the benefits of the proposed merger between Wachovia and Golden West (the “Merger”), including future financial and operating results, cost savings, enhanced revenues and the accretion / dilution to reported earnings that may be realized from the Merger, (ii) statements regarding certain of Wachovia’s and/or Golden West’s goals and expectations with respect to earnings, earnings per share, revenue, expenses and the growth rate in such items, as well as other measures of economic performance, including statements relating to estimates of credit quality trends, and (iii) statements preceded by, followed by or that include the words “may”, “could”, “should”, “would”, “believe”, “anticipate”, “estimate”, “expect”, “intend”, “plan” or similar expressions. These statements are based upon the current beliefs and expectations of Wachovia’s and/or Golden West’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements.
The following factors, among others, could cause actual results to differ materially from that expressed in such forward-looking statements: (1) the risk that the businesses of Wachovia and/or Golden West in connection with the Merger will not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected; (2) expected revenue synergies and cost savings from the Merger may not be fully realized or realized within the expected time frame; (3) revenues following the Merger may be lower than expected; (4) deposit attrition, operating costs, customer loss and business disruption following the Merger, including, without limitation, difficulties in maintaining relationships with employees, may be greater than expected; (5) the ability to obtain governmental approvals of the Merger on the proposed terms and schedule; (6) the failure of Wachovia’s and/or Golden West’s shareholders to approve the Merger, respectively; (7) the strength of the United States economy in general and the strength of the local economies in which Wachovia and/or Golden West conducts operations may be different than expected resulting in, among other things, a deterioration in credit quality or a reduced demand for credit, including the resultant effect on Wachovia’s and/or Golden West’s loan portfolio and allowance for loan losses; (8) the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; (9) potential or actual litigation; (10) inflation, interest rate, market and monetary fluctuations; and (11) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) and the impact of such conditions on Wachovia’s capital markets and capital management activities, including, without limitation, Wachovia’s mergers and acquisition advisory business, equity and debt underwriting activities, private equity investment activities, derivative securities activities, investment and wealth management advisory businesses, and brokerage activities. Additional factors that could cause Wachovia’s and/or Golden West’s results to differ materially from those described in the forward-looking statements can be found in Wachovia’s and Golden West’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed with the SEC. All subsequent written and oral forward-looking statements concerning the proposed Merger or other matters and attributable to Wachovia or Golden West or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements above. Wachovia and Golden West do not undertake any obligation to update any forward-looking statement, whether written or oral, relating to the matters discussed in this news release.
Page 11 – 4622, May 12th Investor Conference Call
Additional information
The proposed Merger will be submitted to Wachovia’s and Golden West’s shareholders for their consideration. Wachovia will file a registration statement, which will include a joint proxy statement/prospectus, and Golden West will file a joint proxy statement, and each of Wachovia and Golden West may file other relevant documents concerning the proposed Merger with the SEC. Shareholders are urged to read the registration statement and the joint proxy statement/prospectus regarding the proposed Merger when they become available and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they will contain important information. You will be able to obtain a free copy of the joint proxy statement/prospectus, as well as other filings containing information about Wachovia and Golden West, at the SEC’s website (http://www.sec.gov). You will also be able to obtain these documents, free of charge, at Wachovia’s website (http://www.wachovia.com) under the tab “Inside Wachovia – Investor Relations” and then under the heading “Financial Reports—SEC Filings”. Copies of the joint proxy statement/prospectus and the SEC filings that will be incorporated by reference in the joint proxy statement/prospectus can also be obtained, free of charge, by directing a request to Wachovia Corporation, Investor Relations, One Wachovia Center, 301 South College Street, Charlotte, NC 28288-0206, (704)-374-6782; or to Golden West, Investor Relations Department, 1901 Harrison Street, Oakland, CA 94612, (510) 446-3420.
Wachovia and Golden West and their respective directors and executive officers, may be deemed to be participants in the solicitation of proxies from the shareholders of Wachovia and/or Golden West in connection with the proposed Merger. Information about the directors and executive officers of Wachovia is set forth in the proxy statement for Wachovia’s 2006 annual meeting of shareholders, as filed with the SEC on a Schedule 14A on March 13, 2006. Information about the directors and executive officers of Golden West is set forth in the proxy statement for Golden West’s 2006 annual meeting of shareholders, as filed with the SEC on a Schedule 14A on March 10, 2006. Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction may be obtained by reading the joint proxy statement/prospectus regarding the proposed Merger when it becomes available. You may obtain free copies of these documents as described in the preceding paragraph.
Page 12 – 4622, May 12th Investor Conference Call